How will US strikes on Iran affect Indian markets this week?

Synopsis

Indian stock markets might experience a downturn this week. This follows US strikes on Iranian nuclear sites, escalating Middle East tensions. Rising oil prices and potential Strait of Hormuz closure could negatively impact market sentiment. Investors are closely watching Iran's response. The Nifty and Sensex previously rebounded, but this new development threatens that recovery.

Mumbai: Indian equities may face pressure early this week after the US launched strikes on three nuclear sites in Iran late Saturday, escalating tensions in the Middle East. A sharp rise in oil prices and a possible shutdown of the Strait of Hormuz by Iran could weigh on sentiment and trigger a gap-down opening on Monday.

The Nifty and Sensex had closed about 1.3% higher on Friday, recouping losses made in the last three sessions on a relief rally sparked by US President Donald Trump putting on hold a plan that may have led to the US involvement in the Israel-Iran conflict. The latest flip flop by the US threatens to reverse that optimism.

Agencies

"The market will respond to how Iran manages the situation," said Amit Khurana, head of equities at Dolat Capital Market. "If tensions flare up again, the impact could be sharply negative."

Oil prices are poised to surging past $80 a barrel on Monday in response to the conflict in the region after wild swings during the previous week. Brent crude futures for August declined 2.3% to $77 a barrel on Friday as any supply disruption through the Strait of Hormuz--through which 40% of oil and over half of India's LNG imports pass-could trigger a price spike. India relies on imports for over 90% of its crude and 54% of its LNG needs.

"Oil prices crossing triple digit or restricted supply will have an adverse impact on the market," said Nilesh Shah, managing director, Kotak Mahindra AMC. "Global factors from Trump policy to oil prices and supply are boiling hot."

The unease around the flare up in the Middle East and Trump's volte face on Iran could weigh on market nerves. "The direction depends on whether we have peace or further escalation in the Middle East," said Sham Chandak, head of institutional equities at Elios Financial Services. He expects the Nifty to move between 24,500 and 25,500 for the rest of June.

"The US's pre-emptive strikes on Iran could potentially incapacitate the country. If we do not see further escalation overnight, the war may be over soon-and markets will obviously cheer in such a situation."

...moreless

...moreless